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Yahoo's Search Leads It To Microsoft

Adieu, Yahoo.

Not the Web site or the company, but the search engine. Yahoo announced this morning that it had signed a 10-year agreement with Microsoft in which the two companies will combine their search and advertising efforts, each ceding much of one field to the other:

In simple terms, Microsoft will now power Yahoo! search while Yahoo! will become the exclusive worldwide relationship sales force for both companies' premium search advertisers.

Replacing Yahoo's search with Microsoft's Bing, even with a Yahoo banner over it, would delete one of the oldest landmarks in the Web landscape. But it also looks like one of the least-unattractive options for the two companies if they want to give Google a serious challenge.

The two companies have set up a "Choice. Value. Innovation." site to herald the news. Technically, this deal takes away some of those things: Web users will have one fewer search site to choose from and one fewer team of developers working on more innovative ways to find things.

Few Web users are likely to miss the Redmond, Wash., company's contribution to Web sales, but few Web users haven't fed a search query to Yahoo's site at some point. Back in the day, most of us did.

Yahoo is now opting to make its own search engine yet another casualty of the economic downturn as it outsources the job to Bing (although the deal allows Microsoft to add Yahoo's search technology to Bing). In return, Yahoo will take over selling "premium" ad space on both companies' Web properties (although Microsoft will handle automatically-placed search ads, and other types of ads will continue to sold separately by each firm). Other Web services, such as e-mail and instant messaging, will remain separate; your Yahoo Mail won't get forwarded to Hotmail or vice versa.

Yahoo began life in February 1994 as a simple catalogue of Web sites put together by Stanford University students Jerry Yang and David Filo. It acquired its name -- at first, an acronym for "Yet Another Hierarchical Officious Oracle" -- not long after, although it took longer for the site to grow into a true search engine and migrate off a server on Stanford's network. (I can still vaguely remember its address... something like

That head start, combined with Yahoo's general proficiency and the missteps of other Web portals (anybody remember Lycos, Excite or HotBot?), allowed Yahoo to become the Microsoft of search engines for quite a few years.

And then yet another Stanford research project grew into a new Web search site. In one of those "dinosaur, meet mammal" moments that seems to happen every half decade or so online, Google found things on the Web faster and more accurately than Yahoo, and didn't try to sell you on 20 other unrelated things at the same time. Then Google began adding other Web services, like e-mail, maps and calendars, that also made Yahoo's fare look clumsy and obnoxious in comparison.

Inertia still happens online, so Yahoo has held on to a respectable chunk of the market -- almost 20 percent of Web searches in the U.S. ran through its site last month, according to ComScore's research. Yahoo has also retained a spot in many people's browser bookmarks and toolbars. For example, it's the only search-shortcut alternative to Google in the Windows and iPhone versions of Apple's Safari browser.

Google has also run away with much of the Web advertising business -- a machine that generates most of its profits.

Microsoft, for its part, spent years fumbling around with quasi-proprietary Web services like MSN or Windows Live. Two winters ago, it tried to solve its online problems by proposing to buy Yahoo for $44.6 billion.

The folks in Redmond, Wash., owe their counterparts in Sunnyvale, Calif., an enormous round of thanks for spurning their offer -- against the advice of nearly everybody in the technology business. Not only would Microsoft have burned through billions of dollars just in time for the economy to plunge off a cliff, the resulting collision of corporate cultures would have left veterans of AOL and Time Warner's disastrous merger bitterly chuckling.

Left on its own, Microsoft had to build a better search site, and with its new Bing it may have done just that. Bing, unlike some of its older sites and even Yahoo's just-redesigned home page, delivers much of the accuracy and the simplicity of Google.

If the alternative is the continued surrender of Web search and advertising to Google -- a competition in which the number-two firm has offered little to distinguish itself from the number-three firm -- that may be an acceptable tradeoff. Google may be a nice company, but even nice companies deserve sustained competition to keep them honest. But let's also hope that we haven't seen the last bright Web-search startup come to life in a computer-science lab somewhere.

By Rob Pegoraro  |  July 29, 2009; 12:37 PM ET
Categories:  The Web  
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Bing's not as good as Google. When I use IE, and search with Bing, I invariably end up going to my Google bookmark and searching again.

Posted by: gbooksdc | July 29, 2009 7:16 PM | Report abuse

I remember the search engines you mention, as well as AltaVista, GoTo, Magellan, and Snap!, among others. And I still occasionally use Dogpile.

I'm afraid Jerry Yang's tenure as CEO demonstrated that he was just another (lowercase) yahoo... Now it's only a matter of time until Steve Ballmer accuses Google of stealing Microsoft copyrighted program code.

Posted by: 54Stratocaster | July 29, 2009 8:59 PM | Report abuse

It seems to me that the best case for MSFT and Yahoo would have been to spin Bing and Yahoo Search off into a separate company jointly owned. Yahoo has some top notch search engineers. While some will likely go to Microsoft, many will go elsewhere (Google, Ask, startups, etc.).

Combining the Yahoo and Bing technologies will likely provide better relevance than either alone, and possibly better than Google, but will it be enough. All three right now are very close.

Posted by: timmsc | July 29, 2009 10:06 PM | Report abuse

When Microsoft saw it was screwed
It finally had to conclude
That to beat Google Inc.
Bing and Yahoo! should link
Though some say the key word's "collude."

News Short n' Sweet by JFD8

Posted by: jd121 | July 29, 2009 10:57 PM | Report abuse

Rob, it may be the case that Yahoo retains nearly 20 % of the search engine market in the United States, but according to StatCounter that would not seem to be the case in North America as a whole for the period 20080701 - 20090727 (, and even less so for the world as a whole ( I agree that Google needs «sustained competition to keep them honest» - or rather that we, as users, need that competition. But permit me to doubt that a combination of Microsoft and Yahoo can provide it....


Posted by: mhenriday | July 30, 2009 11:55 AM | Report abuse

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